TaxTMI 
TaxTMI 
2017 (11) TMI 575
X X X X Extracts X X X X
X X X X Extracts X X X X
....olding that the provisions of section 145(1) are not applicable especially when the Memorandum of Understanding cast an obligation upon the appellant not to compete with the business of M/s Cardiac Care and Allied Health Pvt. Ltd. for a period of two years? (ii) Whether the entire amount of Rs. 1,00,00,000/- is income earned under mercantile system in the year of receipt or will accrue with reference to passage of time of non-competition obligation?" 3. The facts of the case are that assessee who is a Doctor by profession, upto August, 2006 was Director in M/s. Cardian Care & Allied Health Pvt. Ltd. from where he was earning professional fee. Thereafter, he transferred the company and resigned therefrom. An agreement was entered into b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed or whether it should be spread over to the number of years for which the card is issued." 5.1 In this regard it shall be relevant to peruse the Notification No. S.O. 69(E) dated 25.01.1996 wherein the Central Government has notified Accounting Standard-1, more particularly, the expression 'accrual' which has been defined as under: "(b) "Actual" refers to the assumption that revenues and costs are accrued, that is, recognized ad they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate;" 5.2 The assessee has accordingly recorded the revenue as well as expenditure in the financial statement of period to which they relate. We find that the Tribuna....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e receipt as well as expenditure as per Accounting Standard - 9 and the same is disclosed by the assessee by way of Note in the audited accounts. If the contention of the Revenue is accepted and the entire memebership fee collected is taxed in the year of receipt then in the subsequent year when the assessee will incur the expenditure there will be loss. That would give distorted picture of the working result of the assessee. In view of the above, we respectfully following the above decision of ITAT, Hyderabad Bench in the case of Treasure Island (P) Ltd (supra) hold that the method of accounting followed by the assessee was proper and correct method and the Assesing Officer has wrongly rejected the same." 6. In this regard we are suppor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....paria Tools Ltd. (supra) has held that matching principle is required to be followed in order of arrive at the real income of the assessee. 6.2 Similarly, in the case of Commissioner of Income-Tax vs. Dinesh Kumar Goel reported in [2011] 331 ITR 10 (Delhi), the Delhi High Court has held as under: "... even when the income accrues or arises or is deemed to accrue or arise to the assessee in India during previous year, that is to be taxed in that year. It is important, therefore, that receipt of a particular amount in the relevant year should be an "income" under the aforesaid provision. What is the relevant yardstick is the time of accrual or arisal for the purpose of its taxation, viz., in order to be chargeable, the income should acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions of the Tribunal as well as the decisions relied upon by learned advocate for the assessee, we are of the opinion that the Tribunal has committed an error in passing the impugned order so far as considering the membership fees as income when the assessee had not resumed giving the services of the water park to its members. Under such circumstances, the amount received by way of membership fees was required to be considered as an advance and thereafter as and when the business commenced the amount of liability was required to be taxed over a period of time proportionately. The amount of membership fees would be considered as income from the year the business of the assessee commenced. We therefore answer the questions raised in the nega....